This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, click the "Reprints" link at the bottom of any article.

May 9, 2013

Top Advisors Sound Off on Tech: NAPFA Conference

A roundtable discussion at NAPFA in Las Vegas provides advisor insight into the mechanical mind

“Figuring out how to service high-end clients over and above money management is something we’re constantly examining, and technology helps.”

That comment from Ray Mignone, president and COO of Ray Mignone and Associates in Little Neck, N.Y., kicked of a roundtable discussion of top advisors and industry executives about technology integration and practice management.

The roundtable, held at the National Association of Personal Financial Advisors (NAPFA) Spring Conference 2013 in Las Vegas on Wednesday, touched on the pressures RIAs are feeling in today’s business environment, the corresponding opportunities, how they use technology to reduce costs and grow their businesses and what advice they would give other advisors about technology integration.

“It’s still very much a fragmented industry,” added Michael Joyce, COO of JoycePayne Partners is Richmond, Va. “It’s tough for smaller firms to get access to capital, and we know costs are coming our way from a compliance standpoint. We have good cash flow in our firm, but we’re bootstrapping it. If we want to do a lift-out or acquire another firm, we’ll have to get serious.”

Carl Camp, president and COO of Eclectic & Associates in Fullerton, Calif. says he struggles with increasing efficiency while maintaining a personal touch.

“I try to drive as much as I can to paraplanners to free up my time for revenue-generating activity,” Camp said.

Jim Dario, managing director of product and strategy for TD Ameritrade Institutional, addressed Camp’s comment by noting the value of utilizing a CRM and the analytical capability it affords to identify who does what in a firm so administrative tasks can be moved from high-income-producing employees to lower-income-producing employees.

TD Ameritrade Institutional President Tom Nally pointed to how far technology has come in the past 10 to 15 years in terms of helping advisors grow their businesses.

“It’s absolutely amazing,” Nally said. “You could never manage this much money a decade ago. But technology development is happening so fast. What used to take 10 years to develop and release now takes two.”

Said Joyce: “But you have to keep up with [technology]. Being on the proverbial ‘bleeding edge,’ as we often are, is no longer a strategic advantage; it’s increasingly a requirement.”

Joyce said his firm’s tagline is “customized, personalized and innovative,” but the first two make it difficult to scale.

“Technology allows us to mass-produce customized service," he said to general agreement.

The discussion moved away from the challenges advisors are facing to the opportunities they see.

Joyce said the industry’s move toward a fiduciary model from the broker-dealer model is one opportunity, adding it’s a “secular change” and that many firms now in business were lucky with the timing, as they are already “riding this wave.” He also named the opportunities younger generations afford his business.

Dario asked Joyce about his process for reaching out to younger investors.

“We have a young lady that is 26 years old in our firm who is an emerging superstar,” Joyce responded. “She makes sure they’re aware of our blogs and takes the lead in communication with them.”

When asked if something like that can be automated and systematized, Dario said “it’s important for clients to work with advisors who are like them. There is tremendous opportunity for advisors in working with the next generation, and it doesn’t have to be the same model. How you work with the parents can differ from how you work with their children. But if you share that relationship, you’ve got them for another generation.”

Nally noted the “little things” that can go a long way, like holding seminars to teach them about finances.

“There has been a lot of talk about Ric Edelman lowering his minimums to $5,000,” Nally explained. “He’s doing that largely to stay top-of-mind. Most young people are thinking about buying a new car or going on vacation. If one of them gives Ric $5,000 instead, chances are they’re responsible and will be good clients.”

Dario added that boomer clients very much want to involve their kids; they want their tech-savvy kids to go online and research a car for them.

Nally asked the assembled advisors if they are seeing more informed clients since the financial crisis, specifically around the fee model.

Joyce answered that clients were asking more questions and doing more research, and he encourages that, “because just because we’re fee-only doesn’t mean we’re competent.”

Mignone added that they were doing research on the Internet about the advisor before ever picking up the phone to call.

“But so do we,” Joyce added. “I just had a woman come in whose husband recently passed away. I did some research and found out he was one of the country’s foremost experts in structural deficiencies, and worked on the Oklahoma City bombing and 9/11.”

When asked how technology has changed their practices over the years, especially since they all started before the adoption of the Internet, Joyce detailed his tech roots using Lotus 1-2-3.

“It’s been both incremental and exponential change, but it has to or we’ll fall behind,” he said.

Dario credited custodians for pushing and making available much of the technological change in recent decades.

“We started in 1984,” Camp said. “When I think of the big changes, the ability to scan documents immediately comes to mind.”

“There are no more folders in client meetings,” Joyce interjected. “I can bring the document on my mobile device right there with the client.”

“We were audited two years ago,” Mignone added. “We got them everything they needed by the end of the day and none of it was in paper.”

Joyce said he believed RIAs had better technology than other channels, to which Nally responded that breakaway brokers he speaks with are “blown away” by the quality of the technology.

“It’s not that the technology isn’t available, it’s getting them to fully use it,” he said.

When asked if there is anything they need that service providers and custodians aren’t giving them, Camp said it was a tough question.

“How do you not know what you need?” he said, before echoing Nally. “It’s not more technology, but maybe better training on the technology we already have.”

Joyce stepped away from technology and named better access to trust services and credit solutions.

“Wirehouses can offer scale on credit, so clients will keep their trust services there as well. Patnering with custodians on this issue will be key moving forward.”

Mignone said he would like to see a way that portfolio information and data could be automatically integrated into a financial plan to then analyze how clients are doing in relation to key milestones.

"We’re close on that, I think, but now we’re benchmarking on an almost daily year-to-date and I’d like something longer term.”

They were then asked how they stay in front of technological change.

“I’m in a practice management group,” Joyce said. “So I’m able to see what other advisors are doing. No one has a corner on good ideas.”

“It’s not the cost, it’s the time investment,” Mignone added. “A new company might not survive and be around in three years, so you want to make sure you go with a proven solution.”

“And the cost hasn’t come down that much,” Camp said. “Maybe some of the one-off technology has, but not the major programs.”

“And they always say the data conversion will be easy; it’s never easy,” Joyce added.

When asked what advice they would give to other advisors looking to implement new technology, Camp said to let the need drive the technology.

“I don’t want previous procedures to dictate how I use new technology,” he concluded. “I want a fresh start.”